Too soon for G20 obituaries

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Last weekend's meeting of G20 finance ministers and central bankers in Gyoengju, South Korea, serves as a sort of curtain-raiser for next month's leaders' meeting, and expectations for the latter have been sliding over recent weeks.

News that Brazil's finance minister would not attend the Gyoengju gathering (Indonesia's minister was another no-show), followed by warnings from Indian officials that the G20 faced 'serious difficulties' due to increased acrimony over currency policy, prompted fears that the very emerging markets that were supposed to be some of the big winners from the rise of the G20 had grown disenchanted with the body. The FT's Alan Beattie even used the 'D' word, comparing the G20 to the much-maligned Doha Round. Over at Foreign Policy's blog, Dan Drezner warned that the G20 could become a 'dead forum walking'.

Seen in that light, how did the weekend's meetings go'

Well, on the topical issue of currency wars, they went pretty much as expected: not very far. Participants pledged to do their best to avoid currency conflicts and in the final communiqué promised that they would continue to work together to deal with global imbalances. As expected, the IMF has the job of monitoring progress on this front through its Mutual Assessment Process, but given the lack of success with previous attempts along these lines, it is hard to see this as any great breakthrough.

Mind you, the discussions actually went a bit better than expected. By avoiding complete stalemate at a time when there are some rather fundamental disagreements about the direction of national economic policies, the weekend did manage to deliver some forward momentum.

In fact, the ministers and central bank governors did better than that, since the limited progress made on dealing with global imbalances and the associated policy issues was offset by some further advances on IMF governance reform. At Gyoengju, ministers agreed both on a slightly bigger-than-expected quota shift in favour of emerging markets and on a set of reforms to the IMF's 24-member executive board, including the surrender of two board seats by the advanced European economies and a shift to having all Executive Directors elected.

Granted, final implementation of these changes is still more than a year off – and is also pending a successful (double-majority) vote. But assuming they are approved, the changes do allow for another increase in the voice of emerging markets. This in turn might improve the chances of getting a deal elsewhere on the G20's agenda, although it still leaves existing powers (and in particular the US) in a pretty comfortable position when it comes to managing the overall direction of the Fund.

What about the direction of the G20 overall' Sure, it's reasonable to say that a fair amount of the policy consensus reached during the Washington and London summits has evaporated; it's plausible to argue that the Pittsburgh Summit represents the high-tide of the group's influence, with Toronto marking a step down.

Yet it's also worth remembering that those early successes were driven by unusual circumstances – a classic case for the world's leaders of choosing whether to hang together or hang separately. The exigencies created by the GFC meant that initially we saw much bigger and faster progress than might have been reasonably expected for a new grouping under more 'normal' conditions. Modest, incremental progress on issues like IMF reform, reworking the Basel rules, and so forth are obviously a step down from those early glory days. But arguably it was that early success that was surprising, rather than the current slow pace progress.

It shouldn't come as too much of a surprise that, as circumstances have changed, so has the effectiveness of the group. In fact, the expanded and more diversified membership of the G20 was always going to mean that getting consensus would be much tougher than for a grouping like the G7. Yes, getting the G20 to deliver is going to be hard. But since it's very difficult to see any compelling alternative out there, we need to keep working with what we've got. For now, its still far too soon to be writing obituaries for the G20.

Indonesian President Joko Widodo’s first state visit to Australia begins on Sunday at a time when bilateral cooperation is wider and deeper than at any point since the referendum in East Timor, and Australian feelings toward Indonesia are at a high.